I didn’t understand anything about debt until I went to college. My parents has just paid off their house and were completely debt free. I didn’t know that at the time, but I had noticed we were taking more expensive trips, eating out more etc. I had thought my Dad had gotten a nice raise- when in fact due to downturns his company had been laying off people and while he hadn’t had even a cost of living raise in several years, he did retain his job.
I remember getting my first credit card. I was a freshman in college. My Dad was against me having one, but my Mom insisted it was important for me to have one since I would be driving several hours away to school. Dad sat down with me and explained how it worked: I could charge my gasoline on it and when the bill came I would need to pay it completely or they’d charge me interest. We did some simple figures. At the time the going rate for gas was about $.85 a gallon. If I bought 10 gallons on the credit card (paying about $85) but only paid the minimum $10 per month I’d actually pay $95 for the 80 gallons. That’s $.95 a gallon instead of $.85. While it’s not a big difference, it’s the same as stopping at one station that has gas priced $.10 higher than the one next door. Who would do that if they took notice of the price difference? Not many. He also showed me what would happen if I was wreckless and charged up $500. If I only paid the minimums I’d end up paying over $600. Hmm that $5 movie has now become a $6.15 movie…
Had my Dad not taken the time to show me how credit cards worked, I’d have gotten the bill and paid the minimum payment happily every month. I never would have known that I was in essence paying $.10 more for every gallon of gas that I pumped, or paying $6.15 for every movie I went to see instead of $5. Who knows how much I would have happily bought with my new $1,000 credit card limit and spend the next lifetime paying for.
Amazon Code part 3: BE5E claimed!
I am so thankful that we have no consumer debt. Our only debt is mortgage debt, although 2 mortgages 
Living within our means is crucial to our well being. Every time we borrow money we’re trusting that we’ll have enough money later to pay for it, without knowing for sure that we’ll have it. If unexpected expenses arise we’re taking on even more debt. Eventually we’ll grow old and have to stop working. Most social security and retirement benefits will only cover the basics. With debt hanging over our heads and being accustomed to living above our means how will we ever be able to make all the payments? That means we have to pay off all debt.
So the very first step in getting out of debt is being aware of:
- exactly how much debt you have (no generic answers like “it’s a lot” or “not much”)
- what your interest rates are for each loan or debt you have
- how long it will take you to pay them off and at what cost
This is a simple debt worksheet you can use to track your loans/credit cards.
To calculate how long it will take to pay off credit card debt I’d recommend this credit card calculator.
If you need help calculating the time left on your mortgage or other loan, I’d recommend this mortgage calculator. Be sure to click the “show amortization table” button to see how long it will take to pay off the loan and how much interest you’ll pay until then. Note that the payments shown here exclude your insurance and property taxes since those play no part in reducing your mortgage.
Now, it’s easy to beat yourself up when you look at these totals. But remember the first step is not negativity – it’s awareness. You can’t change it, so what’s in the past needs to stay in the past. Now that you’re aware of your debt you need to only look forwards at what you can do to fix the debt.
Next Thursday I’ll share with you the results from our awareness and the next step we’re taking to reduce that debt.
If you are also working on becoming debt free, or have become debt free I’d love to share your story here on Thrifty Texas Penny. Stories can be any length and can be shared anonymously if you’d like. I’ll be sharing one reader’s story every Thursday afternoon for the next several weeks. You can e-mail me at athriftypennyatgmaildotcom if you’d like to share your story.
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